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United Kingdom Unemployment April 2020

United Kingdom: Labor market continues to soften midway through Q2

The latest data suggests the labor market is weakening markedly in Q2, although it is difficult to gauge the precise extent of the deterioration. According to experimental figures released by the ONS in an effort to provide a more up-to-date picture of the health of the labor market, in May the claimant count rose 23.3% month-on-month to 2.8 million, while employment was down roughly 600,000 since March and median monthly pay declined year-on-year. However, the figures should be treated with caution given their experimental nature, and that the fact some of the people claiming benefits may still be employed due to changes to eligibility criteria. Lagged data for February-April showed the unemployment rate was stable at 3.9%.

The government’s wage subsidy scheme (Coronavirus Job Retention Scheme, CJRS) has so far avoided far steeper job losses, with 8.7 million jobs covered by the scheme at end-May. Commenting on the recent figures was Kallum Pickering, economist at Berenberg:

“The data are, for now at least, better than anticipated and support some cautious optimism. With a lot of help from the government employment subsidy scheme, the core of the labour market remains protected from short-term acute shock from the pandemic.”

Going forward, our panelists currently see the unemployment rate peaking at slightly below 8% in Q3 and declining thereafter as economic activity resumes. However, risks are elevated. As Kallum Pickering goes on to say:

“In time, the headline unemployment and employment data could deteriorate materially. Such indicators often lag trends in general economic activity. The risk is of a massive wave of layoffs when the CJRS comes to an end in October.”

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